EPS Calculator (Earnings Per Share)
Basic earnings per share from net income, preferred dividends, and weighted average shares.
What it does
Earnings per share turns a company's profit into a per share number, the figure headlines quote as basic EPS. It takes the income left for common shareholders, after preferred dividends are paid, and divides it by the weighted average number of common shares that were outstanding during the period.
Investors compare EPS across quarters and years, and against the share price through the price to earnings ratio. The tool above returns basic EPS from three inputs: net income, preferred dividends, and weighted average shares.
The weighted average matters because companies issue and buy back shares during a period. If a firm sells more shares halfway through the year, those shares only count for the half in which they existed. A simple count of shares at year end would distort the per share figure.
Preferred dividends are subtracted first because preferred holders have a claim on earnings ahead of common holders. Skipping that step overstates what belongs to common shareholders and, in turn, overstates EPS.
This page covers basic EPS. Diluted EPS goes a step further and adds shares that could appear from options, converts, and awards. When those items are material, diluted EPS is the more conservative number to use, and it will equal basic EPS only when there are no such instruments.
How to use
- Enter net income for the period before preferred dividends.
- Enter total preferred dividends, or leave zero when there are none.
- Enter the weighted average common shares outstanding.
- Read basic earnings per share and the earnings pool used.
- For a quarter, keep all three figures on the same quarter.
- Compare the result with earlier periods and the share price.
Formula
- NI
- Net income for the period in dollars.
- PD
- Preferred dividends subtracted before common holders are paid.
- Shares
- Weighted average common shares outstanding.
Use the same period for all three figures: annual with annual, quarterly with quarterly. Quarterly EPS is not multiplied by four to make an annual number, because seasons and one-off items make that misleading.
Worked example
Example: $12,000,000 income, $1,000,000 preferred, 2,000,000 shares
Net income 12,000,000 dollars, preferred dividends 1,000,000 dollars, weighted average shares 2,000,000.
- Earnings for common shareholders = 12,000,000 - 1,000,000 = 11,000,000 dollars.
- EPS = 11,000,000 / 2,000,000 = 5.50 dollars per share.
- If preferred dividends were ignored, EPS would read 6.00 dollars, an overstatement.
- At a 44 dollar share price, the price to earnings ratio is 44 / 5.50 = 8.0.
Reference table
| Change | Effect on EPS |
|---|---|
| Higher net income | Raises EPS |
| Higher preferred dividends | Lowers EPS |
| More shares issued | Lowers EPS |
| Share buyback | Raises EPS |
| Net loss for the period | Negative EPS |
Limits
- Basic EPS only. It ignores options, warrants, and convertible securities.
- Uses the shares you enter, not a company's reported weighted average.
- Does not adjust for non-recurring items or stock splits on its own.
- A single period can hide a trend. Compare several periods.
Common mistakes
- Forgetting to subtract preferred dividends.
- Using year end shares instead of a weighted average.
- Mixing a quarterly income with annual shares.
- Annualizing a quarterly figure by multiplying by four.
- Calling basic EPS a score of company quality on its own.
Try it yourself
Quick checks. Answers sit tucked under each question.
Income 5,000,000 dollars, no preferred, 1,000,000 shares?
5,000,000 / 1,000,000 = $5.00 per share.
Income 8,000,000 dollars, preferred 2,000,000 dollars, 3,000,000 shares?
(8,000,000 - 2,000,000) / 3,000,000 = $2.00 per share.
Net loss 2,000,000 dollars, 1,000,000 shares?
-2,000,000 / 1,000,000 = -$2.00 per share.
Questions
What is a good EPS?
There is no fixed good value. Compare it with the company's history, its sector, and the share price.
Basic versus diluted EPS?
Basic uses current common shares. Diluted adds shares that could appear from options and converts.
Why subtract preferred dividends?
Preferred holders are paid before common holders, so that money is not available to common shares.
Can EPS be negative?
Yes. A net loss, or preferred dividends above income, makes EPS negative.
How do buybacks affect EPS?
Fewer shares spread the same earnings wider, so EPS rises.
What is the EPS formula?
EPS = (net income - preferred dividends) / weighted average common shares.